Half of pre-retirees save nothing for retirement

Almost half of pre-retirees in the UK (46 per cent) admit they currently do not save anything for retirement, according to research from JP Morgan Ass…

Almost half of pre-retirees in the UK (46 per cent) admit they currently do not save anything for retirement, according to research from JP Morgan Asset Management.

This is despite 60 per cent expecting to rely on a state or workplace pension for income.

Nearly half of individuals (47 per cent) said they will use state benefits as their expected and primary source of income in retirement. This figure was just 29 per cent in 2006 revealing just how much people are struggling in the current economic climate.

Around a third of people (32 per cent) said they will be forced to work part time to make up the difference as the state pension will not be enough to make ends meet.

Only one in five (20 per cent) expect to rely on investments as a source of retirement, down from 41 per cent in 2006.

With the cost of living rising, many people are finding it difficult to find money to make savings for the future, especially when income is not increasing to the same degree.

Some people will take more drastic measures in order to fund their retirement, with 16 per cent saying they would move into a smaller property.

A further 16 per cent revealed they would rely on inheritance, while five per cent of respondents said equity release will be a considered solution.

The research looked into what people would do should they receive a £15,000 windfall. Participants are divided into savers and spenders, with almost half (43 per cent) saying they would save the money, a fifth (21 per cent) would invest it and 16 per cent would pay off a lump sum from their mortgage. 

However, others said they would rather spend it than save it, with 22 per cent admitting they would spend the money on a holiday.

Some 18 per cent would make home improvements and one in ten (11 per cent) would put it towards a new car. 

Interestingly, the number of people who would invest or save a £15,000 windfall has fallen since 2008. More than two-thirds (68 per cent) of individuals would have saved the money  in 2008, but this figure is now less than half (43 per cent) in 2012. In 2008, over a third (36 per cent) said they would have invested it, compared with just 21 per cent in 2012.

With people having little money for luxuries, it is perhaps not a complete surprise many would spend the money, however, it is important to plan for the future as a state pension may not be enough to fund retirement.

Keith Evins, head of UK funds marketing at JP Morgan Asset Management, said "An unexpected windfall would be a simple solution for many, but wishful thinking isn't going to make up the shortfall for people who are not currently saving for retirement. I'd urge people to think more long-term and start making provision for their financial future.

"The short-term gratification of booking a holiday is a great feeling, of course, but spending more precious time thinking about longer-term concerns – like investments – will pay dividends in the future."

By Amy White

Find out more about money management on the ClearDebt blog.

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